While shifts were seen in plan contribution and withdrawal activity in the early months of the pandemic, new data show that throughout the summer there have been early signs of recovery.
Ascensus’ State of Savings: August 2020 report reveals that employers that dialed back matching or discretionary contributions to their retirement plan are reconsidering this decision. The recordkeeping firm saw a 5.5% decrease in the total amount of employer contributions from March through July, but this represents a 2-percentage point improvement over June and a 6-percentage point improvement over May.
The firm’s analysis is based on traditional retirement plans on the Ascensus platform with 500 employees or less.
Improvements in total employer contributions were driven by employers reinstating matching contributions that they had previously stopped or decreased and other discretionary contributions. Overall, Ascensus reports, 82.8% of plans made no matching changes through July, while 7.8% of employers did not contribute a match in July, by choosing either to stop their match (4.3%) or having no match obligation (3.5%) due to payroll interruption. On a positive note, 7% of employers have returned their matching to pre-COVID levels.
Ascensus also reports that it saw a 22.7% decrease in the number of standard retirement account withdrawals based on projections in March through July.
“In addition to this decrease in standard withdrawals, we’ve also seen lower-than-projected loan activity, low utilization of CRDs and CARES loans, and very few savings rate changes on our retirement platform,” the firm emphasizes.
CARES Act Adoption
In fact, employer adoption of CRDs continued to slow throughout the month of July, and fewer than half of all adopting plans had any CRD activity as of the end of the month. Adoption of CARES loans has also slowed and fewer than one-third of all adopting plans had CARES loan activity in July.
Larger plans, not surprisingly, are adopting at a significantly higher rate than the smallest plans (25 or fewer savers). Ascensus’ data below includes Coronavirus-related distribution (CRD) adoption by plan size, based on number of employees:
- 25 or less (8.8%)
- 51–75 (22.3%)
- 26–50 (15.5%)
- 76–100 (24.5%)
- 101+ (40.2%)
Overall, 14% of employers have adopted CRDs and 8.9% have adopted CARES Act loan provisions.
Meanwhile, eligible savers continue to take CRDs and CARES loans at a “consistent, yet very low rate month-over-month since April,” Ascensus notes. From April to July 2020, a total of 2% of eligible savers took a CRD, registering at just about an even 0.5% for each of the four months. CARES loan employee utilization was even lower, registering a total of 0.9% from April through July.
Additional findings show that the large majority of savers made no change to their savings rates, illustrating the positive value of automatic payroll deduction, the firm observes. Though many are “staying the course,” 1.4% have stopped deferring and another 1.4% of savers are no longer receiving contributions to their retirement account, most likely due to furlough or termination.
Ascensus notes that this population of savers that is no longer receiving contributions is concentrated in the smallest retirement plans. An additional 2.1% reduced their savings rate from January through July, while 4.5% increased their savings rate.
